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on Labor Markets - Supply, Demand, and Wages |
| By: | Popp, Martin (Institute for Employment Research (IAB), Nuremberg) |
| Abstract: | Economists increasingly refer to monopsony power to reconcile the absence of negative employment effects of minimum wages with theory. However, systematic evidence for the monopsony argument is scarce. In this paper, I perform a comprehensive test of this argument by using labor market concentration as a proxy for monopsony power. Labor market concentration turns out substantial in Germany. Absent wage floors, higher concentration reduces wages and employment, reflecting monopsonistic conduct of firms. Sectoral minimum wages lead to negative employment effects in slightly concentrated or more competitive labor markets. This effect weakens with increasing concentration and, ultimately, becomes positive in highly concentrated or monopsonistic markets. Overall, the results lend empirical support to the monopsony argument, implying that conventional minimum wage effects on employment conceal heterogeneity across market forms. |
| Keywords: | minimum wage, monopsony power, labor market concentration, markdown |
| JEL: | J42 J38 D41 J23 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17357 |
| By: | Mello, Marco (University of Aberdeen); Moscelli, Giuseppe (University of Surrey); Laliotis, Ioannis (City University London); Sayli, Melisa (University of Surrey) |
| Abstract: | Retention of skilled workers is critical for the delivery of public services in high-stakes environments such as hospital care. We study how contractual pay terms affect the retention of trainee doctors in the English NHS and the relationship between trainee doctors' attrition and hospital quality. Our setting is a nationwide reform that reduced unsocial working hours pay rates. Using a longitudinal sample and a novel linkage of administrative datasets, our quasi difference-in-difference strategy leverages the pre-reform exposure of each trainee doctor to unsocial working hours and suggests that the implementation of the new pay terms led to a 6.7% increase in the annual number of trainee doctors leaving the English NHS. As plausible mechanism, we show that the reform was detrimental to pay satisfaction and increased trainee doctors intentions to change job outside healthcare. By exploiting the effect of the reform, we also document a positive association between trainee doctors' attrition and hospital mortality. |
| Keywords: | job contracts, employee attrition, pay satisfaction, on-the-job training, doctors, hospitals, patient mortality |
| JEL: | I11 J22 J41 J45 J81 C23 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17345 |
| By: | Mühlemann, Samuel (University of Munich) |
| Abstract: | This paper investigates the impact of artificial intelligence (AI) adoption in production processes on workplace training practices, using firm-level data from the BIBB establishment panel on training and competence development (2019-2021). The findings reveal that AI adoption reduces the provision of continuing training for incumbent workers while increasing the share of high-skilled new hires and decreasing medium-skilled hires, thereby contributing to skill polarization. However, AI adoption also increases the number of apprenticeship contracts, particularly in small and medium-sized enterprises (SMEs), underscoring the ongoing importance of apprenticeships in preparing future workers with the skills needed to apply AI in production. |
| Keywords: | artificial intelligence, technological change, automation, apprenticeship training, human capital |
| JEL: | J23 J24 M53 O33 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17367 |
| By: | De Vera, Micole (Banco de España); Garcia-Brazales, Javier (CEMFI) |
| Abstract: | Using a mix of household- and employer-based survey data from 46 countries, we provide novel evidence that workers in larger establishments perform more non-routine analytical tasks, even within narrowly defined occupations. Moreover, workers in larger establishments rely more on the use of information and communication technologies (ICT) to perform these tasks. We also document a 15% raw wage premium that workers in larger establishments enjoy relative to their counterparts in smaller establishments. A mediation analysis shows that our novel empirical facts on the task content of jobs are able to explain between 5–20% of the establishment size wage premium, a similar fraction to what can be explained by selection of workers on education, gender, and age. |
| Keywords: | tasks, occupations, establishment size, cross-country evidence, wage differential |
| JEL: | J24 J31 L25 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17319 |
| By: | Lehner, Lukas (University of Oxford); Parolin, Zachary (Bocconi University); Pignatti, Clemente (ILO International Labour Organization); Schmitt, Rafael Pintro (University of California, Berkeley) |
| Abstract: | Prior research suggests that Walmart Supercenters exert substantial power over the low-wage labor market, though the consequences of Supercenter openings on household incomes and public finances are less clear. This study uses restricted-access Panel Study of Income Dynamics data from 1970 to 2019 to study how Walmart Supercenter openings affect poverty, tax liabilities, and receipt of income transfers. Using a stacked difference-in-differences approach, we find that the opening of a Supercenter leads to a 2 percentage point (16%) increase in poverty. This increase is channeled through declining annual earnings and persists for 10 years following the Supercenter's entry. Increases in poverty are particularly strong for younger and less-educated adults, and for adults with pre-treatment incomes below the national median. Moreover, Walmart Supercenter openings lead to a $200 (or 16%) per household per year increase in government income transfers received, and a $920 (or 5%) per household per year decrease in tax revenues. |
| Keywords: | poverty, monopsony power, Walmart, local labor markets, economic inequality |
| JEL: | J23 J31 J42 R23 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17323 |
| By: | Lachowska, Marta (Upjohn Institute for Employment Research); Mas, Alexandre (University of California, Berkeley); Saggio, Raffaele (University of British Columbia); Woodbury, Stephen A. (Michigan State University) |
| Abstract: | Using a revealed preference approach applied to administrative data from Washington we document that workers have limited discretion over hours at a given employer, there is substantial mismatch between workers who prefer long hours and employers that provide short hours, and hour constraints are prevalent. Voluntary job transitions imply that a ratio of the marginal rate of substitution of earnings for hours to the wage rate is on the order of 0.5-0.6 for prime-age workers. The average absolute deviation between observed and optimal hours is about 15%, and constraints on hours are particularly acute among low-wage workers. On average, observed hours tend to be less than preferred levels, and workers would require a 12% higher wage with their current employer to be as well off as they would be after moving to an employer offering ideal hours. These findings suggest that hour constraints are an equilibrium feature of the labor market because long-hour jobs are costly to employers. |
| Keywords: | hour constraints, mismatch, sorting, labor supply, willingness to pay, wage premiums, hour policies |
| JEL: | J22 J23 J31 J40 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17363 |
| By: | Timothy DeStefano; Nick Johnstone; Richard Kneller; Jonathan Timmis |
| Abstract: | The arrival of cloud computing provides firms a new way to access digital technologies as digital services. Yet, capital incentive policies present in every OECD country are still targeted towards investments in information technology (IT) capital. If cloud services are partial substitutes for IT investments, the presence of capital incentive policies may unintentionally discourage the adoption of cloud and technologies that rely on the cloud, such as artificial intelligence (AI) and big data analytics. This paper exploits a tax incentive in the UK for capital investment as a quasi-natural experiment to examine the impact on firm adoption of cloud computing, big data analytics and AI. The empirical results find that the policy increased investment in IT capital as would be expected; but it slowed firm adoption of cloud, big data and AI. Matched employer-employee data shows that the policy also led firms to reduce their demand for workers that perform data analytics, but not other types of workers. |
| Keywords: | capital incentives, firms, cloud computing, artificial intelligence |
| JEL: | J21 J24 L20 O33 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11369 |
| By: | Raphael Auer; David Köpfer; Josef Švéda; Raphael A. Auer |
| Abstract: | How exposed is the labour market to ever-advancing AI capabilities, to what extent does this substitute human labour, and how will it affect inequality? We address these questions in a simulation of 711 US occupations classified by the importance and level of cognitive skills. We base our simulations on the notion that AI can only perform skills that are within its capabilities and involve computer interaction. At low AI capabilities, 7% of skills are exposed to AI uniformly across the wage spectrum. At moderate and high AI capabilities, 17% and 36% of skills are exposed on average, and up to 45% in the highest wage quartile. Examining complementary versus substitution, we model the impact on side versus core occupational skills. For example, AI capable of bookkeeping helps doctors with administrative work, freeing up time for medical examinations, but risks the jobs of bookkeepers. We find that low AI capabilities complement all workers, as side skills are simpler than core skills. However, as AI capabilities advance, core skills in lower-wage jobs become exposed, threatening substitution and increased inequality. In contrast to the intuitive notion that the rise of AI may harm white-collar workers, we find that those remain safe longer as their core skills are hard to automate. |
| Keywords: | labour market, artificial intelligence, employment, inequality, automation, ChatGPT, GPT, LLM, wage, technology |
| JEL: | E24 E51 G21 G28 J23 M48 O30 O33 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11410 |
| By: | DeVaro, Jed (California State University, East Bay); Fung, Scott (California State University) |
| Abstract: | We empirically test whether executives' increases in base salary when promoted to CEO result from the wage bids of competing firms (i.e., "market-based tournaments") or from the strategic choices of the firm's board of directors to elicit optimal executive incentives (i.e., "classic tournaments"). Our test emphasizes the effect of the "importance of luck" (i.e., the variance of luck) on the pay raises that accompany promotion. Specifically, we focus on how that effect differs between the two types of tournaments. An estimated negative relationship between the importance of luck and the executive salary spread supports market-based tournaments, whereas a positive relationship supports classic tournaments. The results are non-monotonic in firm size. Executive tournaments in both the bottom 13% of firms (i.e., total assets below $376 million) and the top 2.5% of firms (i.e., total assets above $112 billion) are more consistent with classic tournaments, whereas the nearly 85% in the middle of the distribution of firm size are more consistent with market-based tournaments. Also, controlling for firm size, highly concentrated product markets are more consistent with market-based tournaments. Extending market-based tournament theory to allow executives to choose the luck variance reveals that executives infuse their tournaments with a high luck variance, which lowers the expected pay differential and depresses incentives. |
| Keywords: | executive compensation, promotion tournaments, importance of luck, uncertainty in promotion contests, classic and market-based tournaments, vertical pay disparity, firm size, market structure |
| JEL: | G32 G39 J31 M12 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17327 |
| By: | Dickson, Matt (University of Bath); Donnelly, Michael (University of Bath); Kameshwara, Kalyan Kumar (Westminster Business School); Lazetic, Predrag (University of Bath) |
| Abstract: | The UK has one of the highest proportions of tertiary educated workers in Europe but also one of the highest rates of graduate underemployment. Little is known however about the extent to which there is a scarring effect of early graduate underemployment on future labour market outcomes. In this paper, we examine the effect of early underemployment using data on 67, 000 graduates from undergraduate degrees in the UK in 2013. Labour market outcomes at six-months and 42-months post-graduation are linked to administrative records covering higher education, prior attainment, demographics and family background. We find that compared to being in a graduate job six-months post-graduation, early experience of underemployment increases the probability of being underemployed three years later by 0.24. Oster bounds analysis suggests that the causal effect of early underemployment on later underemployment is at least +0.18. This is a large effect relative to the base risk of underemployment at 42-months for those in a graduate job at six-months which is just 0.09. We highlight important implications of these findings, with arguments from both equity and efficiency for policies to help graduates to attain graduate level jobs. |
| Keywords: | underemployment, graduates, higher education, persistence, United Kingdom |
| JEL: | I23 I26 J24 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17364 |
| By: | Canayaz, Mehmet (Pennsylvania State U); Erel, Isil (Ohio State U and ECGI); Gurun, Umit G. (U of Texas at Dallas); Wu, Yufeng (Ohio State U) |
| Abstract: | We examine the repercussions of protectionist policies implemented in the United States since 2018 on the composition of workforce and career choices within the semiconductor industry. We find that the shift towards protectionism, aimed at reviving domestic manufacturing and employment, paradoxically resulted in a significant drop in hiring domestic talent. The effect is stronger for entry-level and junior positions, indicating a disproportionate impact on newcomers to the workforce. Additionally, we trace the trajectories of undergraduate and graduate cohorts possessing chip-related skills over time, and document significant shifts away from the chip industry. These findings are consistent with our model in which protectionist policies affect labor markets through revenue, uncertainty, and substitution channels, potentially leading to decreased hiring of both domestic and foreign workers. Our findings highlight the challenges in achieving the goals of initiatives like the 2022 CHIPS and Science Act, emphasizing the need to address talent shortages to sustain the semiconductor industry's intended growth. |
| JEL: | F16 G15 J21 J23 L10 O30 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:ecl:ohidic:2024-07 |
| By: | Ashvin Gandhi; Ian Larkin; Brian McGarry; Katherine Wen; Huizi Yu; Sarah Berry; Vincent Mor; Maggie Syme; Elizabeth White |
| Abstract: | Health care facilities considering mandating staff vaccination face a difficult tradeoff. While additional vaccination coverage will directly reduce disease transmission within the facility, the imposition of a mandate may also cause vaccine-hesitant staff to quit, which could harm patient care. To study this tradeoff, we leverage comprehensive administrative data covering virtually all US nursing homes, including payroll-based records on approximately 500 million daily nurse shifts and weekly data on COVID transmission and mortality at each facility. We use a difference-in-differences framework to estimate the impact of employer-imposed vaccine mandates at 581 nursing homes on disease spread, employment outcomes, and several patient care metrics. While mandates did slightly increase staff turnover, the effects were concentrated on staff working less than 20 hours per week, and resulted in a reduction of less than two minutes per patient-day. Furthermore, there is only limited evidence of lower levels of care at mandate facilities in typically-monitored conditions such as patient falls, pressure ulcers, or urinary tract infections. In contrast, implementing a vaccine mandate led to large increases in staff vaccinations at mandate facilities, which directly led to less transmission of and lower patient mortality from COVID. We estimate that vaccine mandates saved one patient life for every two facilities that enacted a mandate, a large effect given the typical facility has around 100 beds. Our results suggest that the health benefits of mandates far outweigh the costs in terms of reduced patient care from staff turnover. |
| JEL: | I1 I10 I12 I18 J2 J28 J30 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33072 |
| By: | Katharina Pfeil; Matthias Kasper; Sarah Necker; Lars P. Feld |
| Abstract: | This study examines how tax system design and reform affect labor supply. We conduct an online experiment with 522 participants to assess labor responses to tax reforms that introduce or remove a notch, affecting after-tax income at either the lower or upper end of the income distribution. Our findings indicate asymmetric responses to tax reform as well as substantial heterogeneity at the individual level. In particular, we find an increase in labor supply in response to a tax reform only when the reform reduces the tax burden at the upper end of the income distribution. While, in the aggregate, labor supply adjusts on the extensive and intensive margins, we also find strong evidence of heterogeneity in individual responses, showing that the labor response is primarily driven by individuals directly affected by the reform. We examine the role of misperceptions at the individual level as well as fairness considerations in explaining these results. |
| Keywords: | tax system design, tax reform, notches, labor supply, online experiment |
| JEL: | J20 J22 H24 H30 C91 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11350 |
| By: | Boinet, Césarine (University of Strathclyde); Norris, Jonathan (University of Strathclyde); Romiti, Agnese (University of Strathclyde) |
| Abstract: | In this paper, we examine how pre-birth gender norms shape women's labor market trajectories and occupational choices around motherhood in the United Kingdom. Using data from the British Household Panel Survey, we first quantify the impact of gender norms on earnings and labor supply post-childbirth. Our results show that traditional mothers experience a 18-percentage-point (pp) higher motherhood penalty in earnings and a 20-pp lower motherhood penalty in hours worked compared to egalitarian mothers. Second, we investigate the role of pre-birth comparative advantage within couples, finding that this mechanism applies only to egalitarian parents. Third, we examine the interaction between occupational characteristics, including their degree of familyfriendliness, and pre-birth gender norms. We find that accounting for occupational sorting significantly reduces the average earnings penalty for both traditional and egalitarian mothers, driven entirely by hours worked for traditional mothers. In addition, we show that occupational sorting explains 80% of the short-run earnings penalty gap between traditional and egalitarian mothers and eliminates the difference in hours worked penalties entirely. Thus, traditional women seem to sort pre-birth into occupations that facilitate a larger reduction in hours worked post-motherhood, which in turn have a substantial impact on their earnings trajectory. |
| Keywords: | gender norms, occupational sorting, motherhood penalty |
| JEL: | J16 J22 J24 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17334 |
| By: | David, Sandberg (Department of Economics, Lund University) |
| Abstract: | This study examines the response among young adults to the closure of a large local employer. By using military base closures in Sweden, I find that men experience lower earnings and enroll in tertiary education. This is driven by low-ability men who choose short-term enrollment at nearby colleges and universities. For women, the closures have a positive impact after some years, with increases in both earnings and employment rates, suggesting that closing down a male-dominated employer can benefit the female labor supply. |
| Keywords: | local economic downturn; plant closure; defense cutback; tertiary education; labor market entrants |
| JEL: | H56 I23 J24 |
| Date: | 2024–10–21 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:lunewp:2024_009 |
| By: | Marco Caliendo (University of Potsdam, CEPA, BSoE, IZA, DIW, IAB); Nico Pestel (Maastricht University, IZA, CESifo); Rebecca Olthaus (DIW, BSoE, CEPA, University of Potsdam) |
| Abstract: | We investigate the long-term effects of the introduction of the German minimum wage in 2015 and its subsequent increases on regional employment. Using comprehensive survey data, we are able to measure the regional bite of the minimum wage in 2014, just before its introduction, as well as in 2018, before it was raised substantially in several steps. The introduction mainly affected the labour market in East Germany, while the minimum wage increases increasingly affected low-wage regions in West Germany, with about one third of regions changing their (binary) treatment status between 2014 and 2018. We use different specifications and extensions of the canonical difference-in-differences approach, as well as a set of new estimators that allow unbiased effect estimation with a staggered treatment adoption and heterogeneous treatment effects. Our results show a small negative effect on total dependent employment of 0.5%, driven by a significant reduction in marginal employment of 2.4%. The extended specifications suggest additional effects of the minimum wage increases, as well as stronger negative effects for those regions that were strongly affected by the minimum wage in both periods. |
| Keywords: | minimum wage, employment, regional bite |
| JEL: | J23 J31 J38 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:pot:cepadp:80 |
| By: | Draca, Mirko (London School of Economics); Nathan, Max (University College London); Nguyen-Tien, Viet (London School of Economics); Oliveira-Cunha, Juliana (London School of Economics); Rosso, Anna (University of Milan); Valero, Anna (London School of Economics) |
| Abstract: | Which types of human capital influence the adoption of advanced technologies? We study the skill-biased adoption of information and communication technologies (ICT) across two waves in the UK. Specifically, we compare the 'new wave' of cloud and machine learning / AI technologies during the 2010s - pre-LLM - with the previous wave of personal computer adoption in the 1990s and early 2000s. At the area-level we see the emergence of a distinct STEM-biased adoption effect for the second wave of cloud and machine learning / AI technologies (ML/AI), alongside a general skill-biased effect. A one-standard deviation increase in the baseline share of STEM workers in areas is associated with around 0.3 of a standard deviation higher adoption of cloud and ML/AI. We find similar effects at the firm level where we are able to test for the influence of a wide range of skills. In turn, this STEM-biased adoption pattern has encouraged the concentration of these technologies, leading to more acute differences between high-tech and low-tech areas and firms. In contrast with classical technology diffusion, recent cloud and ML/AI adoption in the UK seems more likely to widen inequalities than reduce them. |
| Keywords: | human capital, ICT, technology diffusion, STEM |
| JEL: | D22 J24 O33 R11 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17329 |
| By: | Cao, Huoqing; Chen, Chaoran; Xi, Xican |
| Abstract: | We document that the gender gap in non-agricultural work in developing countries exists primarily among rural married workers, not singles. Rural married women dedicate a much larger portion of time to home production compared to other groups, making them less likely to pursue non-agricultural employment. We extend a general equilibrium Roy model to incorporate the joint labor supply decisions of rural married couples, accounting for gender-specific labor distortions and entry barriers to non-agriculture. Calibrating the model to China, we find that within-household specialization among married couples greatly amplifies the effects of gender-specific labor distortions, and that changes in entry barriers to non-agriculture widened the gender gap in China between 2000 and 2010. Enhancing public services such as childcare facilities can effectively induce more married women to work in non-agriculture. Extrapolating our model globally, it explains a quarter of the variation in the gender gap across countries. |
| Keywords: | structural transformation, gender gap, home production, within-family specialization, occupational choice |
| JEL: | E13 J11 J16 J22 J24 O11 O13 O41 |
| Date: | 2024–10–08 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122334 |
| By: | Chung, Richard Yiu-Ming (Saint Francis University, Hongkong); DeVaro, Jed (California State University, East Bay); Fung, Scott (California State University) |
| Abstract: | Research Question/ Issue: Do large, within-firm executive pay differences hurt firm performance? Prior literature shows mixed results concerning the sign of the relationship between executive pay disparity and firm performance. This study evaluates that literature, clarifies what tournament theory predicts about the relationship, identifies methodological pitfalls and how to address them, and guides future scholarship in this area of considerable importance to firms and policy makers. Research Findings/ Insights: We estimate the relationship using improved methodology and find evidence of an inverted-U shaped relationship between the executive pay spread and firm performance. However, the peak of this inverted U occurs at such a high level of the executive pay spread that it is practically irrelevant in most firms. The inverted U is found using a market-based measure of firm performance, but not a returns-based measure (i.e., ROA). Theoretical/Academic Implications: This study addresses the theoretical and empirical limitations of the prior literature, thereby providing more credible estimates of the relationship between pay disparity and firm performance. Tournament theory offers a unified framework that can explain an inverted-U-shaped relationship between the executive pay spread and firm performance. Practitioner/Policy Implications: Our results should reduce public concerns that CEOs increase their own compensation to exorbitant levels, to the detriment of firm performance. |
| Keywords: | executive compensation, vertical pay disparity, firm performance, tournament theory, market structure |
| JEL: | G32 G39 J31 M12 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17346 |
| By: | Patrick Lehnert; Harald Pfeifer |
| Abstract: | This paper analyzes the impact of environmental awareness on the occupational choices of adolescents. To do so, we exploit the apprenticeship system in Switzerland, where about two-thirds of adolescents choose an apprenticeship in their preferred occupation at around age 15. We consider two dimensions of environmental awareness as potential drivers of their occupational choice. First, we consider time-persistent regional social norms, which we proxy by regional differences in popular votes on environmental issues. Second, we investigate short-term shocks in environmental awareness, which we proxy by the occurrence of Fridays for Future strikes in different locations at different points in time. To measure whether adolescents choose occupations that have the potential to serve environmental protection, we estimate an occupational greenness score based on Swiss job-ad texts as data. Combining this occupational greenness score with detailed process-generated data on adolescents' applications from Yousty, Switzerland’s largest online job board for apprenticeship positions, we find that environmental awareness is positively related to the greenness of adolescents' occupational choices. However, this finding applies only to short-term shocks in environmental awareness and not to time-persistent pro-environmental norms. We interpret this result as evidence for a social-movement effect on norms and values that significantly alter adolescents' occupational choices. |
| Keywords: | Vocational education and training, apprenticeships, occupational choice, environmental awareness, climate strikes, social norms |
| JEL: | D91 J13 J24 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iso:educat:0231 |
| By: | Weidmann, Ben (Harvard Kennedy School); Vecci, Joseph (Department of Economics, University of Gothenburg); Said, Farah (Lahore University of Management Sciences); Deming, David (Harvard Kennedy School and NBER); Bhalotra, Sonia (University of Warwick, IFS, CESifo, CEPR, IZA) |
| Abstract: | This paper develops a novel method to identify the causal contribution of managers to team performance. The method requires repeated random assignment of managers to multiple teams and controls for individual skills. A good manager is someone who consistently causes their team to produce more than the sum of their parts. In a large pre-registered lab experiment, we find that good managers have roughly twice the impact on team performance as good workers do. People who nominate themselves to be in charge perform worse than managers appointed by lottery. This appears to be partly because self-promoted managers are overconfident, especially about their social skills. Managerial performance is positively predicted by economic decision-making skill and fluid intelligence – but not gender, age, or ethnicity. Selecting managers on skills rather than demographics or preferences for leadership could substantially increase organizational productivity. |
| Keywords: | Management, Teamwork, Skills, Measurement, Experiment JEL Classification: M54, J24, C90, C92 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:cge:wacage:715 |
| By: | Olof Rosenqvist; Håkan Selin |
| Abstract: | Take-up of social benefits is a central issue in poverty alleviation and fiscal evaluations of policy reforms. However, it is difficult to find exogenous variation in the benefit level, and little is therefore known about take-up responses to basic financial incentives. We exploit large and plausibly random variation in levels of ”flat-rate parental leave benefits”, which all Swedish parents are entitled to. There are no financial reasons to leave money on the table, but take-up is nevertheless imperfect. Higher benefits substantially increase claiming across the income distribution. We further detect sizable spillover effects on subsequent take-up of low-income earners. |
| Keywords: | parental benefits, incomplete take-up, after-tax benefits |
| JEL: | H24 J22 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11402 |
| By: | Katharine G. Abraham; Henry S. Farber |
| Abstract: | Prior to the passage of the Affordable Care Act (ACA), part-time workers were much less likely than full-time workers to have health insurance. The ACA included multiple provisions intended to raise health insurance coverage rates, including a mandate that employers provide affordable coverage to full-time workers, a requirement that dependents be allowed to remain on their parents’ plan until age 26, extensions of Medicaid coverage, and the establishment of health insurance exchanges on which lower-income households could purchase subsidized coverage. Implementation of these provisions was associated with a decline in the full-time/part-time coverage gap from 6.5 percentage points in 2013 to 3.1 percentage points in 2021. Increases in Medicaid coverage and insurance purchased on the exchanges reduced were the largest contributors to the reduction in the full-time/part-time coverage gap. |
| JEL: | I13 I18 I30 J32 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33046 |
| By: | Josep Pijoan-Mas (CEMFI AND CEPR); Pau Roldan-Blanco (BANCO DE ESPAÑA, CEMFI AND UNIVERSIDAD AUTÓNOMA DE BARCELONA) |
| Abstract: | We study the effects of dual labor markets (i.e. the co-existence of fixed-term and open-ended contracts) on the allocation of workers within and across firms, the equilibrium distribution of firms, aggregate productivity, and welfare. Using rich Spanish administrative data, we document that the use of fixed-term contracts is very heterogeneous across firms within narrowly defined sectors. In particular, there is a strong relationship between the share of temporary workers and firm size, which is positive when looking at within-firm variation but negative when looking at the variation between firms. To explain these facts, we use a directed search model of multi-worker firms, with ex-ante firm heterogeneity in technology types, and ex-post firm heterogeneity in transitory productivity, the composition of employment by contract type (fixed-term or open-ended) and human capital accumulated on the job. In counterfactual exercises, we find that limiting the use of fixed-term contracts decreases the share of temporary employment and increases aggregate productivity, but it also reduces total employment and leads to an overall decline in total output and welfare. The increase in productivity comes from an improved selection of firms, which more than offsets an increased misallocation of workers across firms. |
| Keywords: | dual labor markets, temporary contracts, firm dynamics, unemployment |
| JEL: | D83 E24 J41 L11 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2442 |
| By: | Li, Haizheng (Georgia Institute of Technology); Liu, Qinyi (University of Nottingham Ningbo China); Xu, Yiting (Central University of Finance and Economics Beijing) |
| Abstract: | In this study, we investigate misreporting behavior in online surveys based on the field experiments in a large-scale online training program for rural teachers. We link the digitally recorded data with survey responses and integrate randomized controlled trials (RCTs) in the survey design. Noncognitive human capital is measured using both self-reported personality traits and proxies based on observed behaviors. Our results show that the impact of observed individual characteristics varies depending on the nature of the question and survey specifics. Unobserved heterogeneity affects both survey participation and response accuracy, resulting in sample selectivity. Noncognitive human capital inferred from observed behaviors consistently shows important influence on misreporting, while that measured by self-reported personality traits suffers from the same misreporting problem. However, behavior proxy may also capture factors external to survey respondents, and it is important to separate the effect of noncognitive human capital from the external impacts. Additionally, survey design affects misreporting. Therefore, improving the efficiency of survey such as by changing the saliency and optimizing the sequence of questions, can improve survey quality. These findings carry important implications for using survey data and for improving survey data quality. |
| Keywords: | misreporting, noncognitive human capital, survey design, RCT intervention |
| JEL: | D91 D83 C93 J24 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17332 |
| By: | Matthias Efing; Stefanie Ehmann; Patrick Kampkötter; Raphael Moritz |
| Abstract: | This paper examines the integration of ESG performance metrics into executive compensation using a detailed panel dataset of European executives. Despite becoming more widespread, most ESG metrics are largely discretionary, carry immaterial weights in payout calculations, and contribute little to executive pay risk. Such ESG metrics with arguably weak incentive power are common in financial firms and large companies, particularly for their most visible executives, which seems consistent with greenwashing. In contrast, binding ESG metrics with significant weights, which have potential to influence incentives, are only found in sectors with a large environmental footprint. |
| Keywords: | executive compensation, ESG, ESG metrics, ESG contracting, CSR contracting, sustainability, incentive contracting, optimal contracts |
| JEL: | G30 G35 J33 M12 M52 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11407 |
| By: | Somers, Melline (RS: GSBE other - not theme-related research, ROA / Health, skills and inequality); Fleck, Lara (ROA / Human capital in the region, RS: GSBE other - not theme-related research); Groot, Wim (Maastricht Graduate School of Governance, RS: GSBE MGSoG, RS: CAPHRI - R2 - Creating Value-Based Health Care, Health Services Research); van Merode, Frits (Faculteit FHML Centraal, RS: CAPHRI - R2 - Creating Value-Based Health Care) |
| Abstract: | Like in many other high-income countries, the Netherlands experiences significant staff shortages in both healthcare and education. The key shortage occupations in these sectors are nurses and teachers. Both occupations suffer from high retirements rates and encounter difficulties in attracting and retaining (early career) workers. Due to early attrition, both sectors accumulate considerable hidden reserves. In this study, we estimate the magnitude of these hidden reserves and explore directions for unlocking this untapped potential. We define the hidden reserve as individuals who obtained a nursing or teaching diploma, but are not employed in the healthcare or education sector. Our definition of the hidden reserve also encompasses the number of additional hours that part-time workers could supply to reach a full-time working week. Using registry data, we show that the hidden reserves among (former) nurses and teachers by far exceeds the current staff shortages. Our analysis of survey data reveals that inactive nurses and teachers perceive several working conditions more favorably than their active counterparts. Activating this hidden reserve could involve strategies such as reducing work pressure and providing greater control over working hours, salary, and autonomy. |
| JEL: | J45 J81 |
| Date: | 2024–10–30 |
| URL: | https://d.repec.org/n?u=RePEc:unm:umaror:2024004e |
| By: | Moffat, John (Durham University Business School); Roth, Duncan H.W. (Institute for Employment Research (IAB), Nuremberg) |
| Abstract: | This paper uses monthly data on tertiary education graduates in 19 European countries covering 2004-2017 to assess the short-run effects of entry conditions on the transition into employment. Using an instrumental variables approach, a one percentage point increase in the unemployment rate is found to reduce the hazard rate of transitioning from unemployment into employment by 6%. The effect is stronger in southern European countries and, within this group, is almost entirely due to negative effects on females. |
| Keywords: | entry conditions, tertiary education graduates, transition to employment, proportional hazards model, residual inclusion |
| JEL: | J64 J11 J23 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17360 |
| By: | Sigurd S. Arntzen; Jon H. Fiva; Rune J. Sørensen |
| Abstract: | This paper assesses the effectiveness of democratic systems in preventing individuals with criminal backgrounds from holding political office. Unlike many countries, Norway has no legal restrictions against felons running for office. We analyze local election candidates from 2003 to 2019, paired with administrative records of criminal offenses. We demonstrate that individuals with criminal records are systematically penalized at every stage of their political careers. Candidates are less likely to have criminal records than the general population, with elected officials less likely to have criminal backgrounds than their unelected peers, and mayors being the most lawful. Through a series of counterfactual exercises, we demonstrate that the most significant reduction in criminal involvement occurs at the nomination stage, especially within established local party organizations. |
| Keywords: | political selection, criminal backgrounds, voter behaviour, political parties |
| JEL: | D72 D73 J24 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11412 |
| By: | Draca, Mirko (University of Warwick, CAGE Research Centre and CEP); Nathan, Max (University College London, CEP); Nguyen-Tien, Viet (CEP, IGC, London School of Economics); Oliveira-Cunha, Juliana (CEP, University College London); Rosso, Anna (CEP, University of Insubria); Valero, Anna (CEP, POID, London School of Economics) |
| Abstract: | Which types of human capital influence the adoption of advanced technologies? We study the skill-biased adoption of information and communication technologies (ICT) across two waves in the UK. Specifically, we compare the ‘new wave’ of cloud and machine learning / AI technologies during the 2010s - pre-LLM - with the previous wave of personal computer adoption in the 1990s and early 2000s. At the area-level we see the emergence of a distinct STEM-biased adoption effect for the second wave of cloud and machine learning / AI technologies (ML/AI), alongside a general skill-biased effect. A one-standard deviation increase in the baseline share of STEM workers in areas is associated with around 0.3 of a standard deviation higher adoption of cloud and ML/AI. We find similar effects at the firm level where we are able to test for the influence of a wide range of skills. In turn, this STEM-biased adoption pattern has encouraged the concentration of these technologies, leading to more acute differences between high-tech and low-tech areas and firms. In contrast with classical technology diffusion, recent cloud and ML/AI adoption in the UK seems more likely to widen inequalities than reduce them. |
| Keywords: | Technology Diffusion, ICT, Human Capital, STEM JEL Classification: D22, J24, O33, R11 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:cge:wacage:726 |
| By: | Britto, Diogo (University of Milan Bicocca); Daniele, Gianmarco (Bocconi University); Le Moglie, Marco (Bocconi University); Pinotti, Paolo (Bocconi University); Sampaio, Breno (Universidade Federal de Pernambuco) |
| Abstract: | We study the prevalence and effects of individuals with past criminal charges among candidates and elected politicians in Brazil. Individuals with past criminal charges are twice as likely to both run for office and be elected compared to other individuals. This pattern persists across political parties and government levels, even when controlling for a broad set of observable characteristics. Randomized anti-corruption audits reduce the share of mayors with criminal records, but only when conducted in election years. Using a regression discontinuity design focusing on close elections, we demonstrate that the election of mayors with criminal backgrounds leads to higher rates of underweight births and infant mortality. Additionally, there is an increase in political patronage, particularly in the health sector, which is consistent with the negative impacts on local public health outcomes. |
| Keywords: | politicians, crime, audits, policies, patronage |
| JEL: | K42 J45 P16 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17328 |
| By: | Pierpaolo Benigno; Gauti B. Eggertsson |
| Abstract: | This paper reexamines the Phillips and Beveridge curves to explain the inflation surge in the U.S. during the 2020s. We argue that the pre-surge consensus regarding both curves requires substantial revision. We propose that the Inverse-L (INV-L) New Keynesian Phillips Curve replace the standard New Keynesian Phillips Curve. The INV-L curve is piecewise-linear and more sensitive to labor market conditions when it crosses the Beveridge threshold — a point at which the labor market becomes excessively tight and enters a "labor shortage" regime. We introduce a modified Beveridge curve that features a near-vertical slope once the Beveridge threshold is passed, suggesting that in this region, adjustment in labor market tightness occurs almost exclusively through a drop in vacancies rather than an increase in unemployment. This feature matches the U.S. experience since the Federal Reserve's tightening cycle began in March 2022. We also observe a similar pattern in the data during five other inflation surges over the past 111 years where the Beveridge threshold was breached. We define a Beveridge-threshold (BT) unemployment rate. Once unemployment falls below this rate, policymakers must be alert to sharp inflationary pressures from demand or supply shocks. We explore several policy implications. |
| JEL: | E0 E30 E40 E42 E44 E47 E49 E5 E51 E58 J20 J39 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33095 |